Tips For Small Business

Tips For Small Businesses

Are you a sole-proprietor? Are you in a partnership, or a business manager? Whatever form of small business you are managing you must know how to keep your business alive during economic recessions. Anytime the cash flow in your business, large or small, starts to tighten up, the money management must be handled like food ration on a lost ship.

Develop good cash-flow management habit
Some of the things you can and must do include protecting yourself from expenditures made on sudden impulse. We've all bought merchandise or service we really didn't need simply because we were in the mood, or perhaps in response to the flamboyancy of the advertising or the persuasiveness of the salesperson. Then we sort of "wake up" a couple of days later and find that we've committed hundreds of thousands of business funds for an item or service that's not essential to the success of our own business, when really pressing items had been waiting for those funds.

If you are incorporated, you can eliminate these impulse purchases by including in your by-laws a clause that states: "All purchasing decisions over (a certain amount) are contingent upon approval by the board of directors." This will force you to consider any impulse purchases of considerable cost, and may even be a reminder in the case of smaller purchases.

If your business is a partnership, you can state, when faced with a buying decision, that all purchases are contingent upon the approval of a third party. In reality, the third party can be your partner, one of your department heads or your Accountant.

If your business is a sole proprietorship, you don't have much to worry about. However, give yourself three days to think about the purchase. If after thinking you decide you don’t really need it or can’t afford it, move on and don’t sweat it.

While you may think you cannot afford it, be sure that you don't short-change yourself on professional services. This would apply especially during a time of emergency. Anytime you commit yourself and move ahead without completely investigating all the angles, and preparing yourself for all the contingencies that may arise, you're cutting too close. Regardless of the costs involved, it always pays off in the long run to seek out the advice of experienced professionals before embarking on a plan that could ruin you.

When sales are down, you must be firm when saying no to people trying to sell you luxuries for your business. When business is booming, you undoubtedly will allow sales people to show you new models of equipment or a new line of supplies; but when your business is down, skip the entertaining frills and concentrate on the basics. Great care must be taken however, to maintain courtesy and allow these sellers to consider you a friend and call back at another time.


Benefit from other peoples experiences
Your company's books should reflect your way of thinking, and whoever maintains them should generate information according to your policies. Hire an outside accountant or accounting firm to figure your return on your investment, as well as the turnover on your accounts receivable and inventory. Such an audit or survey should focus in depth on any or every item within the financial statement that merits special attention. In this way, you'll probably uncover any potential financial problems before they become readily apparent, and certainly before they could get out of hand.

Many small companies set up advisory boards of outside professional people. These are sometimes known as Power Circles, and once in place, the business always benefits, especially in times of short operating capital. Such an advisory board or power circle should include an attorney, a certified public accountant, owners or managers of businesses similar to yours, and retired executives. Setting up such an advisory board of directors is really quite easy, because most people you ask will be honoured to serve. Once your board is set up, you should meet once a month and present material for review. Each meeting will be a discussion of your business problems and an input from your advisors relative to possible solutions. These members of your board of advisors will offer you advice as well as alternatives, and provide you with objectivity. No formal decisions need to be made either at your board meeting, or as a result of them, but you will be able to gain a great deal from the suggestions you hear.


Help the cash-flow inwards
Most of your customers have the money to pay at least some of what they owe you immediately. To keep them current, and the number of accounts receivable in your files to a minimum, you must call them on the phone, genuinely, enquire how business is going for them and tell them you are about to send them their invoice you just want to know if that would be “O.K.” Most people will respond positively to your considerate gesture. Ask for an explanation why they are falling to honour their contractual obligation. If you develop such a habit as part of your operating procedure, you'll find your invoices will magically be drawn to the front of their piles of bills to pay. Always maintain a courteous attitude. Never hesitate, or be too much of a "nice guy" when it comes to collecting from your clients.


Playing smart with your bank
As a business owner or manager, you can methodically build your credit rating with your local bank by practicing the following: when you have a good cash flow, you should borrow a determined percentage of your working capital from your bank every 90 days. Simply borrow the money, and place it in an interest bearing account, and then pay it all back at least a month or so before it is due. By doing this, you will increase the borrowing power of your signature, and strengthen your ability to obtain needed financing on short notice. This is a kind of business leverage that will be of great value to you whenever your cash position becomes less favourable.


Utilise resources made available to you
By all means, join your industry's local and national trade associations. Most of these organizations have a wealth of information available on everything from details on your competitors to average industry sales figures, new products, services, and trends.

When given a membership certificate or wall plaque, you must display these conspicuously on your office wall. Customers like to see such "seals of approval" and feel additional confidence in your business when they see them.

If at all possible, have your spouse work in the business with you for at least three or four weeks per year. The important thing is that if for any reason you are not available to run the business, your spouse will be familiar with certain people and situations about your business. These people should include your attorney, accountant, any consultants or advisors, creditors and your major suppliers. The long-term advantages of having your spouse work four weeks per year in your business with you will greatly outweigh the short-term inconvenience. Many couples share responsibility and time entirely, which is in most cases even more desirable.

Whenever you can, and as often as you need it, take advantage of whatever free business counselling is available. Some local universities and many private organizations hold seminars at minimal cost, and often without charge. Take advantage of the services offered by your bank and local library.


Conclusion
The important thing about running a small business is to know the direction in which you're heading; to know on a day-to-day basis your progress in that very direction; to be aware of what your competitors are doing and to practice good money management at all times. All this will prepare you to recognize potential problems before they arise.

You can survive and thrive with a small business, regardless of the economic climate. Surround yourself with smart people you can learn from. Seek them out. Do not wait for mentors to come to you. Practice sound business management at all times.

Carry you cup half full.

Never stop learning.